California state controller won't issue IOUs this month

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The state controller says, despite the budget battle in Sacramento, he won't have to issue IOUs yet.

It’s sort of the equivalent of the widow and orphans finding out they won’t be evicted today. Maybe later, but not today.

Controller John Chiang says state tax revenue in August was almost 4 percent higher than the Department of Finance projected. That means he can still pay the state government’s bills with real money, at least for another month.

If the governor and Sacramento lawmakers can’t get a budget done by the end of September, Chiang will issue IOUs in October.

Last year, he started sending them out in July, as soon as the fiscal year began. While the budget battle dragged on for two months, he issued 450,000 IOUs.

They look just like checks from the State of California and, for a few weeks, they weren’t any different, either. Most banks accepted them so they could redeem them later and earn some interest.

The state was prepared to pay three months of interest at an annual rate of 3.75 percent. Instead, it paid only two months because the budget got done.